http://www.washingtonpost.com/world/middle_east/egypt-president-warns-against-any-unrest-tells-parliament-nation-must-focus-on-economy/2012/12/29/a4a02abc-51b2-11e2-835b-02f92c0daa43_print.html
In the nationally televised speech, Mohammed Morsi said the nation’s entire efforts should be focused on “production, work, seriousness and effort” now that a new constitution came into effect this week. He blamed protests and violence the past month for causing further damage to an economy already deteriorating from the turmoil since the fall of autocrat Hosni Mubarak early last year.
In an alarm bell over the economy, the central bank announced soon after Morsi’s speech that foreign currency reserves — which have been bleeding away for nearly two years — are at a “critical” level, the minimum needed to cover foreign debt payments and buy strategic imports.
Morsi’s strongly worded address to lawmakers appeared aimed at sending a message to the mainly liberal and secular opposition not to engage in any new protests, depicting unrest as a threat to the priority of rebuilding.
All sides must “realize the needs of the moment” and work only through “mature democracy while avoiding violence,” Morsi told the 270-member upper house, or Shura Council. “We condemn and reject all forms of violence by individuals, groups, institutions and even from the nation and its government. This is completely rejected.”
He appeared to chide the opposition for not working with him.
“We all know the interests of the nation,” he said. “Would any of us be happy if the nation goes bankrupt? I don’t doubt anyone’s intentions. But can anyone here be happy if the nation is exposed to economic weakness?”
The mainly liberal and secular opposition accuses Morsi of concentrating all power on the Muslim Brotherhood, from which he hails, and other Islamists and steamrolling any alternative voices.
The main opposition groups have refused to join a national dialogue convened by Morsi, saying past talks have brought no compromise. They also stayed out of the president’s appointments last week of a few opposition figures to the overwhelmingly Islamist Shura Council, calling the move tokenism.
Egypt’s president warns against unrest as foreign reserves at “minimum critical level”
By Associated Press,
CAIRO — Egypt’s Islamist president used his first address before the newly convened upper house of parliament on Saturday to warn against any unrest that could harm the country’s battered economy, as he renewed calls for the opposition to join in a national dialogue.In the nationally televised speech, Mohammed Morsi said the nation’s entire efforts should be focused on “production, work, seriousness and effort” now that a new constitution came into effect this week. He blamed protests and violence the past month for causing further damage to an economy already deteriorating from the turmoil since the fall of autocrat Hosni Mubarak early last year.
In an alarm bell over the economy, the central bank announced soon after Morsi’s speech that foreign currency reserves — which have been bleeding away for nearly two years — are at a “critical” level, the minimum needed to cover foreign debt payments and buy strategic imports.
Morsi’s strongly worded address to lawmakers appeared aimed at sending a message to the mainly liberal and secular opposition not to engage in any new protests, depicting unrest as a threat to the priority of rebuilding.
All sides must “realize the needs of the moment” and work only through “mature democracy while avoiding violence,” Morsi told the 270-member upper house, or Shura Council. “We condemn and reject all forms of violence by individuals, groups, institutions and even from the nation and its government. This is completely rejected.”
He appeared to chide the opposition for not working with him.
“We all know the interests of the nation,” he said. “Would any of us be happy if the nation goes bankrupt? I don’t doubt anyone’s intentions. But can anyone here be happy if the nation is exposed to economic weakness?”
The mainly liberal and secular opposition accuses Morsi of concentrating all power on the Muslim Brotherhood, from which he hails, and other Islamists and steamrolling any alternative voices.
The main opposition groups have refused to join a national dialogue convened by Morsi, saying past talks have brought no compromise. They also stayed out of the president’s appointments last week of a few opposition figures to the overwhelmingly Islamist Shura Council, calling the move tokenism.
The bitterness between the two sides was inflamed by the crisis of the past month leading up to the referendum that passed the new constitution. Mass street rallies were held by both the opposition trying to stop the charter and by Morsi’s Islamist supporters determined to push it to victory. Clashes that erupted left 10 dead. The charter was approved by 64 percent, but with a low turnout of around 33 percent. Civil society groups and the opposition also point to incidents of fraud in the vote they say have not been properly investigated.
Opponents fear the new charter will consecrate the Islamists’ power. The document allows for a stronger implementation of Islamic law, or Shariah, than in the past and has provisions that could limit civil rights and freedoms of minorities.
Morsi has depicted his national dialogue as a chance for all factions to have a voice in planning the next steps and drawing up key legislation to put before the upper house, including a law organizing parliamentary elections. So far, mainly Islamists and only a few small opposition parties are participating.
Liberal former lawmaker Amr Hamzawi said the president’s speech offered no new insights and failed to acknowledge significant opposition to the Islamist-drafted constitution. Hamzawi was among those who walked out in protest of the Islamists’ handling of the draft process earlier this year.
“We need binding mechanisms to amend the flawed constitution, guarantee that the legislative role of the upper house of parliament will be temporary and to ensure fair elections,” he said. “We will not enter into fraud elections each and every time.”
Morsi’s address aimed to set the tone as the Shura Council begins work on a slate of new laws. The upper house normally has few powers but it will now serve as the law-making body until a new lower house is chosen in national elections expected within a few months. Two thirds of the Shura Council members were elected in voting last winter, but few Egyptians bothered to vote, and Islamist allies of Morsi swept the chamber.
The ultraconservative Salafi al-Nour Party, the second strongest party after the Brotherhood’s political wing, suffered a blow this week when its founder and chief Emad Abdel-Ghafour resigned to start a new party, Al-Watan. He took with him around 150 members, including many who were elected to office. The fracturing of the party may bolster the Brotherhood in the coming elections.
In his speech, Morsi repeatedly said it was time to return to “production” and “work.” But he did not give details on an overall economic program, including crucial questions like how the government will tackle a crippling budget deficit or carry out expected tax hikes or reductions of subsidies.
The impending austerity measures are major concerns in a country where some 40 percent of the 85 million population live near or below the poverty line of surviving on $2 a day. Morsi’s government has requested a $4.8 billion loan from the International Monetary Fund to bridge the budget deficit, but talks are on hold after the government reversed plans for tax hikes this month.
Instead, Morsi denounced those who he said were spreading panic about Egypt’s economy, saying the country will “not go bankrupt.” He underlined that banks were healthy, after a rush to buy dollars the past week over fears of devaluation of the Egyptian pound.
“Those who talk about bankruptcy, they are the ones who are bankrupt. Egypt will never be bankrupt and will not kneel, God willing,” he said to a round of applause.
He directly blamed the past month’s violence for Standard & Poor’s downgrading this week of Egypt’s long-term credit rating one level this week to B-, six steps below investment grade.
Morsi presented the country’s foreign currency reserves, currently at $15 billion, as up slightly from last year, though he acknowledged they were still down dramatically from around $36 billion in 2010.
Opponents fear the new charter will consecrate the Islamists’ power. The document allows for a stronger implementation of Islamic law, or Shariah, than in the past and has provisions that could limit civil rights and freedoms of minorities.
Morsi has depicted his national dialogue as a chance for all factions to have a voice in planning the next steps and drawing up key legislation to put before the upper house, including a law organizing parliamentary elections. So far, mainly Islamists and only a few small opposition parties are participating.
Liberal former lawmaker Amr Hamzawi said the president’s speech offered no new insights and failed to acknowledge significant opposition to the Islamist-drafted constitution. Hamzawi was among those who walked out in protest of the Islamists’ handling of the draft process earlier this year.
“We need binding mechanisms to amend the flawed constitution, guarantee that the legislative role of the upper house of parliament will be temporary and to ensure fair elections,” he said. “We will not enter into fraud elections each and every time.”
Morsi’s address aimed to set the tone as the Shura Council begins work on a slate of new laws. The upper house normally has few powers but it will now serve as the law-making body until a new lower house is chosen in national elections expected within a few months. Two thirds of the Shura Council members were elected in voting last winter, but few Egyptians bothered to vote, and Islamist allies of Morsi swept the chamber.
The ultraconservative Salafi al-Nour Party, the second strongest party after the Brotherhood’s political wing, suffered a blow this week when its founder and chief Emad Abdel-Ghafour resigned to start a new party, Al-Watan. He took with him around 150 members, including many who were elected to office. The fracturing of the party may bolster the Brotherhood in the coming elections.
In his speech, Morsi repeatedly said it was time to return to “production” and “work.” But he did not give details on an overall economic program, including crucial questions like how the government will tackle a crippling budget deficit or carry out expected tax hikes or reductions of subsidies.
The impending austerity measures are major concerns in a country where some 40 percent of the 85 million population live near or below the poverty line of surviving on $2 a day. Morsi’s government has requested a $4.8 billion loan from the International Monetary Fund to bridge the budget deficit, but talks are on hold after the government reversed plans for tax hikes this month.
Instead, Morsi denounced those who he said were spreading panic about Egypt’s economy, saying the country will “not go bankrupt.” He underlined that banks were healthy, after a rush to buy dollars the past week over fears of devaluation of the Egyptian pound.
“Those who talk about bankruptcy, they are the ones who are bankrupt. Egypt will never be bankrupt and will not kneel, God willing,” he said to a round of applause.
He directly blamed the past month’s violence for Standard & Poor’s downgrading this week of Egypt’s long-term credit rating one level this week to B-, six steps below investment grade.
Morsi presented the country’s foreign currency reserves, currently at $15 billion, as up slightly from last year, though he acknowledged they were still down dramatically from around $36 billion in 2010.
After last year’s anti-Mubarak uprising, foreign investment and tourism — one of the country’s biggest money makers — dried up. With fewer dollars coming in, the central bank has been spending reserves furiously to prop up the currency and pay for key imports. The slight uptick in reserves from last year is mainly due to hundreds of millions of dollars provided by the Gulf nation of Qatar.
In its statement Saturday, the central bank announced the introduction of a new auction system for banks buying and selling U.S. dollars, urging citizens to “ration usage” of foreign currency in favor of the Egyptian pound.
Amr Adly, who heads the Social and Economic Justice Unit at the Egyptian Initiative for Personal Rights, said Morsi’s speech failed to outline a real economic recovery plan.
“We need to know the reality of the economic situation and have an idea of the measures that will be taken to address this situation,” Adly said. “We are not bankrupt yet because we can still service the debt, but we are on the verge of bankruptcy.”
and.....
http://www.egyptindependent.com/news/egypt-s-economy-will-face-tougher-hurdles-2013
In its statement Saturday, the central bank announced the introduction of a new auction system for banks buying and selling U.S. dollars, urging citizens to “ration usage” of foreign currency in favor of the Egyptian pound.
Amr Adly, who heads the Social and Economic Justice Unit at the Egyptian Initiative for Personal Rights, said Morsi’s speech failed to outline a real economic recovery plan.
“We need to know the reality of the economic situation and have an idea of the measures that will be taken to address this situation,” Adly said. “We are not bankrupt yet because we can still service the debt, but we are on the verge of bankruptcy.”
and.....
http://www.egyptindependent.com/news/egypt-s-economy-will-face-tougher-hurdles-2013
Egypt’s economy will face tougher hurdles in 2013
Thu, 27/12/2012 - 12:52
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Talk of economic recovery has all but gone silent in Egypt, replaced by doomsday predictions about the depths to which the country’s dire conditions will spiral.
While the foundations for a robust economy still exist, gross mismanagement continues to add stress to the country’s ailing finances and widening budget deficit. Much like in 2011, the economic turbulence of 2012 mirrored lapses in Egypt’s political transition, and the scenario is likely to carry on well into the coming year.
When asked about the main factor hindering recovery this past year, and which will continue to plague the economy moving forward, five experts cited shortcomings in top-level policy formulation, decision-making and the frailty of the political structure.
Answers ranged from the “volatile domestic political environment” to lack of leadership and vision, the “absence of the state” and, of course, the current state of polarization which is unlikely to be letting up anytime soon.
Angus Blair, founder of The Signet Institute, a Cairo-based think-tank on MENA economies, says, “I do not expect the political ‘noise’ to dampen any time soon given the clear polarization in society, politically, and the slower economy has created further economic problems.”
“The government’s economic plan is going to have to be more creative and brave to build domestic confidence and economic growth,” he adds.
Uncertainty loomed over the market and dented investor confidence in the months following the 25 January uprising, and was further dampened under the rule of the military council and the prolonged transition process. The light at the end of the tunnel — or so it seemed — was the promise of a free and fair election culminating with a democratically elected president who would steer the economy back on track.
What has happened instead is that this uncertainty has gone from hovering threateningly above the economic stratosphere to taking root, and in turn, has struck the core of the state’s finances.
Wael Ziada, head of research at regional investment bank EFG-Hermes, says the key in the coming year will be “reducing the budget deficit and trying to prevent a case of a sharp and disorderly devaluation [of the pound],” adding that the government must move quickly to meet rising local demand for energy and restructure subsidies.
Egypt’s budget deficit increased to LE80.7 billion (US$13 billion) during the first five months of the current fiscal year 2012/13, increasing by an additional 37 percent since President Mohamed Morsy took office.
As a result of “poor and misguided measures and actions,” says Karim Helal, investment banking adviser and chairman of the Asean-Egypt Business Association, the coming year will see Egypt dealing with a “monstrous budget and fiscal deficit, dwindling reserves, inflationary pressure, pressure on the pound and its implications, deteriorating credit rating, inevitable and long overdue hard to swallow pills in terms of economic reforms, and near zero foreign direct investment.”
Foreign reserves have dwindled by more than half since January 2011, reaching US$15.035 billion, highly compromising the state’s ability to import vital food and petroleum products. In the past two years, the central bank has burned through around US$20 billion to prop up the Egyptian pound, which has lost more than 5 percent of its value, recently hitting an eight-year low and last trading at 6.17 to the US dollar.
While facing criticism by some for not letting the pound fall to its real rate and maintaining instead the level of foreign reserves, the central bank’s policy has been lauded by others for saving the pound from a dramatic and sudden devaluation.
It’s fair to argue that the strategy was initially a short-term measure, without realizing how long the state of political paralysis would continue to affect the economy. In 2012, the government then resorted to relying on funds from Qatar to replenish foreign reserves. An expert recently said further support is anticipated from Turkey as well as the African Development Bank. That is yet another highly unsustainable short-term strategy, further increasing Egypt’s debts.
While less volatile, the more gradual devaluation will still result in higher inflation and rising food prices amid the enduring economic slowdown creating few jobs and leading to rising unemployment.
The exponentially deepening funding crisis is made worse by Standard & Poor’s recent cut of Egypt’s long-term sovereign rating to ‘B-’ from ‘B’, making it more costly to borrow.
“The negative outlook reflects our view that a further downgrade is possible if a significant worsening of the domestic political situation results in a sharp deterioration of economic indicators,” S&P said.
Further compounding the situation is the decision to postpone the final approval on the US$4.8 billion International Monetary Fund loan.
While contentious in and of itself among rights groups and activists, many economists say at this point, there are few other options.
In a recent note on Egypt, Capital Economics says, “Without an IMF deal (or financing assistance from the Gulf), Egypt could be tipped into a full-blown balance of payments crisis. This would see the pound collapse, bond yields surge and output slump.”
Much of the financing promised to Egypt is contingent on the IMF loan, which was set for 19 December, but delayed in the midst of political turbulence in the aftermath of Morsy’s November constitutional declaration.
The IMF has called on Egypt to curb energy subsidies, make modifications to taxes and has advised that it allow “the currency to move in line with market forces — while avoiding excessive short-term volatility.”
But a batch of new taxes introduced inconspicuously during the period in which Morsy’s decisions were immune from judicial review, were swiftly suspended when they faced a harsh backlash the moment they were publicized.
The taxes will be implemented however, and the suspension was a temporary political maneuver.
Still, the move highlighted the inability of the president and the government to remain steadfast in their decisions. Whether or not these decisions and retractions are prudent is an afterthought; what’s become apparent is the lack of broad support for the president as well as the government’s inability to put together a solid economic program.
It was months before the Cabinet could come up with a clear economic program for Egypt. When it was finally made public in November after being presented to the IMF delegation, the program was criticized for bearing a stark resemblance to the one of Hosni Mubarak’s “reform” Cabinet.
On a more optimistic note, Alaa Ezz, secretary general of Egypt’s Federation of Industries, says political unrest may ease after parliamentary elections in the first quarter of the year, adding that “subject to the conclusion of the IMF agreement, and a highly necessary dialogue and consensus on major issues, it is expected that our [credit] rating will improve and investments will start flowing back, as well as tourism.”
But the proper environment that would bring back tourism and foreign direct investment brings us back to the issue at hand: the failure of the state to guarantee security and make decisions that would build investor confidence.
After recovering slightly in 2012, tourism numbers began falling again in November when violent protests pitted supporters and opponents of Morsy against one other.
Christmas is typically a high season for tourists, but this year cancellations abound. This in addition to findings of a recent study released by the Tourism Ministry showing that the sector has been losing US$267 million a week since the onset of the 25 January uprising, leading to layoffs and revenue losses.
Cairo tourism had not been able to rebound throughout the transition, but in 2012, even areas that had been considered calmer and far from any direct action were hit first by a wave of kidnappings in Sinai then by a string of attacks on security premises in Arish.
If and until the president and government can sustain security in the area, there’s little reason for tourists to return — the sector cannot stand to be ignored much longer, and like Egypt’s economy, must be protected from bouts of political instability.
Capital Economics describes the situation eloquently: “Egypt’s post-revolution transition continues to be bumpy…and for every two steps forward the country seems to take one back. This looks set to continue for much of the next year.”
Going forward, what Blair recommends is for Egypt to cut corporate tax by 2 percent and create incentives that would bring small and medium enterprises into the formal sector, among other measures.
All agreed that Egypt’s economic conditions need to be communicated openly and honestly with citizens in order to reach a level of consensus on the measures that need to be taken.
Moreover, Blair says the state needs to “fundamentally tackle hydrocarbon subsidies [and] start an agricultural revolution, also using investment incentives, to encourage industrial farming, hydroponics, and efficient water use.”
As well as investing in mass public transport and better roads, “the government still has enormous work to do to cut bureaucracy,” he adds.
Helal agrees, and adds that “infrastructure and mega projects are a priority, requiring massive investments which will trickle down fast…and create employment on a much needed large scale.”
Ezz, similarly, says the economic question needs to be thrust to the forefront. “The budget deficit has to be tackled through tax reforms (direct and indirect),” and the state’s expenses must be rationalized, with subsidies as a priority.
“In all conditions, international commitments must be respected, otherwise, we are moving back by decades.”
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